Bennett Environmental Inc.
TSX : BEV
AMEX : BEL

Bennett Environmental Inc.

May 31, 2006 20:53 ET

Bennett Environmental Inc. "BEI" Reports on Restatement of its Financial Statements and Other Related Documents for 2003 and 2004

OAKVILLE, ONTARIO--(CCNMatthews - May 31, 2006) - Bennett Environmental Inc. (TSX:BEV)(AMEX:BEL) -

Highlights

- Restatement results in no cumulative net earnings change between 2004 and 2003

- No change to Retained Earnings at December 31, 2004

Bennett Environmental Inc. today announced the finalization, and the filing with the regulatory authorities in Canada and the U.S., of the restatement of its financial statements and other related documents for 2003 and 2004. In conducting this restatement, Bennett consulted with its registered independent accounting firm, KPMG LLP.

While the restatement adjustments change the Company's previously reported results of operations in each of the individual annual reporting periods, the adjustments do not change the cumulative results of operations for the two year period. The cumulative restated revenue, and net earnings for the two year period, are the same as the previously reported cumulative amounts.

In calculating contract revenue earned in 2003, relating solely to the Saglek contract, the Company inappropriately accounted for the revenue related to additional costs incurred as change orders. Revenue for the Saglek contract, a project awarded to Bennett Environmental by Defence Construction Canada, was accounted for using the percentage of completion method. The Company recognized revenue in excess of additional costs incurred and revenue for costs incurred that was not probable of recovery of approximately $5.3 million. The Company has now determined that the revenue related to the additional costs incurred should have been accounted for as a claim. Management has determined that the contract provided a legal basis for the claim, the additional costs were caused by circumstances that were unforeseen at the contract date and were not the result of deficiencies in the Company's performance, the costs associated with the claim were identifiable and reasonable in view of the work performed, and management's claim submitted in 2004 was objective and verifiable. Accordingly, the Company has recorded a restatement adjustment to reduce revenue for the year ended December 31, 2003 by $5.3 million, and unbilled receivable (included in accounts receivable) as at December 31, 2003 by $5.3 million. This same amount should have been recorded as revenue in 2004, leaving the cumulative revenue for the two year period unchanged from that previously reported.

In addition, the Company determined that during 2004 and 2003 certain operating expense items relating to the Saglek contract were recorded incorrectly in the period and items of a capital nature were expensed in the period incurred, rather than being capitalized and amortized over the estimated useful life of the capital asset. A portion of the operating expenses were recovered from the customer, thus accounts receivable is also affected. Accordingly, the Company has recorded a restatement adjustment for the year ended December 31, 2003 to increase operating expenses by $1.3 million, to decrease amortization expense by $0.2 million, to increase capital assets by $0.6 million, to decrease accounts receivable by $1.3 million and to increase accounts payable and accrued liabilities by $0.4 million. These amounts reverse in 2004 leaving cumulative expenses for the two year period unchanged.



The impact of the restatement on Consolidated Statement of Operations
for the year ended December 31, 2003 is as follows:

---------------------------------------------------------------------
As previously Restatement As restated
reported for the for the year
year ended December ended December
31, 2003 31, 2003
---------------------------------------------------------------------
Statement of earnings
---------------------------------------------------------------------
Sales $69,806,526 $(5,318,849) $64,487,677
---------------------------------------------------------------------
Operating costs 32,419,935 1,324,413 33,744,348
---------------------------------------------------------------------
Amortization 1,800,326 (197,660) 1,602,666
---------------------------------------------------------------------
Current income taxes 8,912,582 (1,865,387) 7,047,195
---------------------------------------------------------------------
Net income 18,173,459 (4,580,215) 13,593,244
---------------------------------------------------------------------


The impact of the restatement on the Consolidated Balance Sheet as at
December 31, 2003 is as follows:

---------------------------------------------------------------------
As previously reported Restatement As restated at
at December 31, 2003 December 31, 2003
---------------------------------------------------------------------
Accounts Receivable $28,839,675 $(6,715,320) $22,124,355
---------------------------------------------------------------------
Property, plant
and equipment 23,779,384 629,505 24,408,889
---------------------------------------------------------------------
Accounts payable
and accrued
liabilities 9,964,937 359,787 10,324,724
---------------------------------------------------------------------
Income taxes payable 2,961,632 (1,865,387) 1,096,245
---------------------------------------------------------------------
Retained earnings 29,298,743 (4,580,215) 24,718,528
---------------------------------------------------------------------


The impact of the restatement on the Consolidated Statement of Cash
Flows for the year ended December 31, 2003 is as follows:

---------------------------------------------------------------------
As previously Restatement As restated
reported for the for the year
year ended December ended December
31, 2003 31, 2003
---------------------------------------------------------------------
Cash provided by
(used in) operations:
---------------------------------------------------------------------
Net earnings $18,173,459 $(4,580,215) $13,593,244
---------------------------------------------------------------------
Amortization 1,800,326 (197,660) 1,602,666
---------------------------------------------------------------------
Accounts receivable (16,506,230) 6,715,320 (9,790,910)
---------------------------------------------------------------------
Accounts payable
and accrued liabilities 2,082,269 359,787 2,442,056
---------------------------------------------------------------------
Income taxes
receivable/payable (2,900,891) (1,865,387) (4,766,278)
---------------------------------------------------------------------
Cash flows from
operations 4,535,494 431,845 4,967,339
---------------------------------------------------------------------
Cash provided by
(used in) investments:
---------------------------------------------------------------------
Purchase of property,
plant and equipment (11,316,302) (431,845) (11,748,147)
---------------------------------------------------------------------
Cash used in investments (14,832,871) (431,845) (15,264,716)
---------------------------------------------------------------------


Restatement of 2004

The Company continued to incur additional costs related to the remediation of contaminated materials under the Saglek contract. As a consequence of the 2003 restatement adjustments and accounting for the revenue under the contract in accordance with the percentage of completion method of accounting, the Company has recorded a restatement adjustment to increase revenue for the year ended December 31, 2004 and to increase accounts receivable during the year ended December 31, 2004 in the amount of $5.3 million.

In addition, the Company incorrectly recorded expenses and capitalized certain items of a capital nature during the year ended December 31, 2004 that should have been recorded in 2003 as noted above. The cumulative restated revenue and net earnings (loss) for the two year period are the same as the previously reported cumulative amounts.

The related income tax effect of the above adjustments of $1.9 million was recorded as an increase to current income tax expense for the year ended December 31, 2004 and a reduction to income taxes receivable during the year ended December 31, 2004.



The impact of the restatement on Consolidated Statement of Operations
for the year ended December 31, 2004 is as follows:

---------------------------------------------------------------------
As previously Restatement As restated
reported for the for the year
year ended December ended December
31, 2004 31, 2004
---------------------------------------------------------------------
Statement of earnings
---------------------------------------------------------------------
Sales $25,323,203 $5,318,849 $30,642,052
---------------------------------------------------------------------
Operating costs 26,736,521 (1,168,396) 25,568,125
---------------------------------------------------------------------
Amortization 3,729,728 41,643 3,771,371
---------------------------------------------------------------------
Current income taxes (4,802,434) 1,865,387 (2,937,047)
---------------------------------------------------------------------
Net loss (18,535,239) 4,580,215 (13,955,024)
---------------------------------------------------------------------

The impact of the restatement on the Consolidated Balance Sheet as at
December 31, 2004 is as follows:

---------------------------------------------------------------------
As previously reported Restatement As restated at
at December 31, 2004 December 31, 2004
---------------------------------------------------------------------
Accounts Receivable $14,316,648 - $14,316,648
---------------------------------------------------------------------
Property, plant
and equipment 48,920,377 - 48,920,377
---------------------------------------------------------------------
Accounts Payable
and accrued
liabilities 6,646,005 - 6,646,005
---------------------------------------------------------------------
Income taxes
receivable 3,417,204 - 3,417,204
---------------------------------------------------------------------
Retained earnings 10,763,504 - 10,763,504
---------------------------------------------------------------------


The impact of the restatement on the Consolidated Statement of Cash
Flows for the year ended December 31, 2004 is as follows:

---------------------------------------------------------------------
As previously Restatement As restated
reported for the for the year
year ended December ended December
31, 2004 31, 2004
---------------------------------------------------------------------
Cash provided by
(used in) operations:
---------------------------------------------------------------------
Loss for the year $(18,535,239) $4,580,215 $(13,955,024)
---------------------------------------------------------------------
Amortization 3,729,728 41,643 3,771,371
---------------------------------------------------------------------
Accounts receivable 14,523,027 (6,715,320) 7,807,707
---------------------------------------------------------------------
Accounts payable
and accrued
liabilities (3,568,330) (359,787) (3,928,117)
---------------------------------------------------------------------
Income taxes
receivable/payable (6,378,836) 1,865,387 (4,513,449)
---------------------------------------------------------------------
Cash used in operations (4,721,769) (587,862) (5,309,631)
---------------------------------------------------------------------
Cash provided by
(used in) investments:
---------------------------------------------------------------------
Purchase of property,
plant and equipment (28,892,497) 587,862 (28,304,635)
---------------------------------------------------------------------
Cash flows from
(used in) investments (30,329,030) 587,862 (29,741,168)
---------------------------------------------------------------------


This press release should be read together with the financial statements and other related financial documents.

Forward Looking Statements

Certain statements contained in this press release and in certain documents incorporated by reference into this press release constitute forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and "confident" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. BEI believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this press release should not be unduly relied upon. These statements speak only as of the date of this press release. BEI undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Bennett Environmental Inc.

Bennett Environmental Inc. is a North American leader in high temperature treatment services for the remediation of contaminated soil and has provided thermal solutions to contamination problems throughout Quebec and the US. Bennett Environmental's technology provides for the safe, economical and permanent solution to contaminated soil. Independent testing has consistently proven that the technology operates well within the most stringent criteria in North America.

Bennett Environmental is listed on the Toronto Stock Exchange (Trading Symbol "BEV") and the American Stock Exchange (Trading Symbol "BEL").

Contact Information

  • Bennett Environmental Inc. - Oakville office
    Al Bulckaert
    President & CEO
    (905) 339-1540
    or
    Bennett Environmental Inc. - Oakville office
    Andrew Boulanger
    Vice President/CFO
    (905) 339-1540
    www.bennettenv.com